Buy Mahindra Lifespace - Motilal Oswal

Mahindra Lifespaces (MLIFE IN; Mkt Cap USD0.4b, CMP Rs491, Buy)

- Results in line: Mahindra Lifespaces' (MLL) 1QFY11 results were in line with our expectations. Standalone revenues increased by 43.7% YoY to Rs679m, and net profit increased 39% YoY to Rs145m. The sale of residential units was Rs920m v/s Rs210m in 1QFY10 and Rs5.9b in FY10. EBITDA was Rs163m and EBITDA margins were 23.9%. We model MLL's consolidated revenues and net profit for FY11 at Rs5.2b and Rs1.1b respectively and its revenues at Rs3.9b and Rs943m respectively.

- Operational update: MLL signed an MOU to acquire 23 acres or 1.8msf of land in Pune and a JDA for 10 acres (1msf) for a project in Hyderabad. Both projects are likely to be NAV accretive and are not part of our NAV. Sale of residential units was Rs920m v/s Rs210m in 1QFY10 and Rs5.9 in FY10. MLL's project at Eminente at Goregaon, Spendour at Bhandup, Royale in Pune and Chloris at Faridabad are progressing per schedule.

- Valuation and view: MLL has a sound business model, a healthy balance sheet and no land outstandings. Our SOTP value for MLL is Rs552/share: (1) Chennai SEZ at Rs163/share, (2) Jaipur SEZ at Rs170/share, (3) residential vertical at Rs160/share, and (4) other rental assets at Rs60/share. Our valuations do not include: (1) a 52-acre Thane project, (2) a 50-acre commercial project at Chennai SEZ, and 3) two planned new SEZs/industrial parks in Chennai and near the Mumbai-Pune Expressway (for which an advance of ~Rs1.3b has been paid), and 4) recent MOU for 1.8msf in Pune and JDA for 1msf in Hyderabad. The stock trades at ~1.7x FY12E adjusted book value of Rs287 and at 10% discount to its SOTP value. Buy.

Source : Equity Bulls

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